Marcel MasséLiberalPresident of the Treasury Board and Minister responsible for Infrastructure

moved that Bill C-78, an act to establish the Public Sector Pension Investment Board, to amend the Public Service Superannuation Act, the Canadian Forces Superannuation Act, the Royal Canadian Mounted Police Superannuation Act, the Defence Services Pension Continuation Act, the Royal Canadian Mounted Police Pension Continuation Act, the Members of Parliament Retiring Allowances Act and the Canada Post Corporation Act and to make a consequential amendment to another act, be read the second time and referred to a committee.

Mr. Speaker, I regret that the introduction of Bill C-78 was delayed by motions. This legislation is so important that it should be considered a top priority.

Bill C-78 introduces the first major amendments to public service pension plans in over 30 years. These amendments are critical to the survival of these plans as we know them.

Let me first address my comments to those who benefit from these plans, that is current and past government employees, because many false statements have been made regarding the technical changes that our government is proposing to our employees' pension plans.

First, all the benefits for which our employees made contributions during their career will be fully guaranteed and maintained. Not only will these benefits be fully guaranteed and maintained, they will even be improved.

Therefore, current and past federal public service employees need not worry about the future, because it is precisely to preserve the financial future of these pension plans that the government decided to act.

The technical changes submitted to the approval of this House are based on our government's concern to ensure fairness to Canadian taxpayers, but also to our current and past employees. The existing public service pension plans were established some 50 years ago and they clearly must be adjusted to the new realities.

Let me explain. When the Canada pension plan was established it was agreed with our employees that their annual contributions to the public service plan and to the Canada pension plan combined would not increase over the percentage of their wages that they were then paying, which was 7.5% of their salaries.

The original contribution rate of employees to the CPP has risen over time from 1.8% in 1966 to 3.5% today. The CPP rate, as agreed by the federal government and the provinces together, will climb by 2003 to 4.95% of the wages and salaries.

However, each time our employees contribution rate to the CPP increases their contribution to the government's pension fund decreases since their total contribution cannot exceed 7.5% of their wages. Historically the government and its employees shared pension plan costs on a 60:40 ratio. With the increase in CPP premiums this proportion has gradually changed to 70:30 and it will be 80:20 in 2003 if we do not act now.

Members would no doubt suggest that the government could simply increase contributions, reduce benefits or let the pension funds accumulate shortfalls even if the benefits of the pension plans were eventually reduced. To all of these options the proper answer is no, and that is the whole reason for Bill C-78.

The three acts that govern the government's pension funds restrict contributions to the ceiling of 7.5% of earnings, prohibit the reduction of benefits, and require the government to cover all annual shortfalls in its pension plans.

Is it fair for federal employees to enjoy both the guarantee of always paying the same percentage of premiums and the guarantee of benefits that will never be reduced while Canadian taxpayers are constantly assured of paying a bigger and bigger share of the pension plan of government employees, as well as funding any shortfalls? The government does not think so.

We must not forget that, ultimately, the government represents taxpayers who, in addition to having to save up for their own retirement, must also assume the costs of federal public servants' pension plans.

It is neither right nor fair that taxpayers are having to save up more and more for their own retirement, when public servants are contributing less and less. Fairness to our employees cannot take precedence over the fairness we owe Canadian taxpayers.

In recent years, public service, RCMP and National Defence services pension plans have built up a surplus of approximately $30 billion. Regardless of what employee unions think, this money belongs to Canadian taxpayers.

Over the years, it is taxpayers who have absorbed all the deficits run up by government employee pension plans. It is taxpayers who have therefore assumed all the risks while our employees rested easy in the knowledge that their retirement was looked after.

The existing legislation provides for mechanisms to manage pension plan deficits, but none for accumulated surpluses. In other words, the existing legislation accounts for surpluses, but the government, and therefore taxpayers, must assume all deficits.

Bill C-78 will address surpluses and deficits alike, and will provide for mechanisms to dispose of future surpluses. Existing surpluses will gradually be reduced to an acceptable level over a period of up to 15 years.

People may wonder how we propose to dispose of any surpluses in the future. As things now stand—and this is what the bill provides for right now—Treasury Board will decide how these surpluses will be used.

However, if representatives of present and retired employees were to agree to share the risks with Canadian taxpayers, we are completely prepared to co-manage and therefore to share any future surplus.

We could, for example, decide together to give a contributions holiday to plan participants, or to the employer, or both, or to withdraw all or part of the surplus.

Bill C-78 will ensure the long term financial stability of our employees' pension funds. To that end, it will create a public sector pension investment board, which will be responsible for investing future employer and employee contributions in the stock market.

At present, contributions are used only to purchase government savings bonds. In future, their investment in diversified portfolios will give a better yield and thus will make it possible to offer a better guarantee for the future, to limit the increase in costs, and eventually to improve benefits.

For example, a 1% improvement in the long term performance of the public service plan could reduce its overall costs by 15% to 20%. This new public sector pension investment board will be completely independent of the government and of plan participants. It will therefore be totally free in its investment decisions, having the sole objective of maximizing the holdings of the public sector pension fund.

Many other public pension funds in the country already make market investments. This new provision will enable more Canadian businesses access to a new source of financing.

This should be of the utmost interest to our employees. If the return on the investments which I just mentioned is lower than expected, employees would receive the same level of pension to which they had contributed during their careers, including 100% inflation protection. The government guarantees the integrity of the benefits of our employee pension funds and will continue to cover the shortfalls.

Bill C-78 is part of an overall plan. It re-establishes fairness between taxpayers and our employees in the funding of the pension plans. It strengthens the long term sustainability of the plans and will attempt to reduce the costs for all members.

For its part, Bill C-71, the budget implementation act, proposes improvements to the Public Service Superannuation Act, the Canadian Forces Superannuation Act and the Royal Canadian Mounted Police Superannuation Act.

Pension benefits will be calculated in the future using the average of the best five consecutive years of earnings rather than the best six consecutive years, as in the current plan, applying a five year average of the year's maximum pensionable earnings to calculate the CPP/QPP related reduction, rather than using the current three year average. In short, the government will increase employee pensions while freezing contributions to the employee plan for at least four years.

Bill C-78 also includes a series of technical changes to improve the benefits linked to federal employee pension plans. It will reduce the contribution rate of the supplementary death benefit plan, the government's group life insurance program, and increase the paid-up benefit amount. It will reduce by 25% the contribution rate of employees who contribute at the rate of five cents per month for every $250 of coverage. It will double to $10,000 the benefit to eligible employees having already reached age 65 and it will extend eligibility for paid-up benefits and delay the onset of coverage reduction.

All of these improvements will be made possible by a $1 billion surplus in the supplementary death benefits account, due in part to increased life expectancies.

Bill C-78 will also award survivor benefits to same-sex spouses who apply for them. The applicable criteria will be the same as for common-law spouses.

The bill would do away with Treasury Board's discretionary power in relation to survivor benefits and will set criteria for eligibility for benefits.

The Government of Canada would thus be bringing its pension plans into line with those of the governments of Nova Scotia, British Columbia, Ontario, New Brunswick and Saskatchewan. We would also be in compliance with a number of recent decisions by courts favouring the granting of benefits to same sex partners.

These provisions would also apply to members' pensions. These changes will increase the number of people entitled to survivor's benefits under the terms of the three major pension plans to some 50 new beneficiaries a year.

Bill C-78 will also finally establish a separate pension plan for Canada Post employees. It makes sense for Canada Post to manage its own pension plan, as all major employers do.

The plan would come into effect on October 1, 2000 and would reflect the reform to the Public Service Superannuation Act. The value of past service for pension purposes will be totally protected. Employee benefits will be the same as under the Public Service Superannuation Act.

The terms of the plan would be negotiable under the terms of the Canada Labour Code after one year of activity. The negotiations would not affect benefits accumulated to date. However, in negotiations held after October 1, 2001, Canada Post and its employees' bargaining agents could negotiate change as they wish.

For the plan to be self-sufficient, future contributions by employees and the Corporation would be invested in the market in accordance with the Pensions Benefits Standards Regulations. Canada Post could set up an independent investment office to oversee investments. Under the bill, the Canada Post Corporation should also establish a life insurance program similar to the supplementary death benefit plan.

Canada Post retirees will also be happy to learn that Canada Post intends to established a shared cost voluntary dental plan, which would cover their survivors and eligible dependants.

I want to assure members of the House that these measures are in no way an indication of plans to privatize Canada Post. Separate pension plans already exist for other crown corporations, such as the CBC and the Canada Mortgage and Housing Corporation. These plans have not been privatized, nor will they be.

I am convinced that our proposed technical amendments to the three public service pension plans are realistic and fair. They will be beneficial to all of the stakeholders, namely, our employees, the government and ultimately Canadian taxpayers. Some people will blame us for having acted unilaterally in determining these major changes to our employees' pension plans. However, we have to remind the House that we have consulted with our partners over many months on the challenges that I have just described, but unfortunately we were unable to reach an agreement on the necessary reforms.

The time to act is long overdue. The action we are taking is being taken in a spirit of fairness, both toward our employees and toward all Canadian taxpayers. As I have tried to show in the past few minutes, this bill will modernize and improve the public service pension plans.

I am proud of our public servants and the work which they do on behalf of all Canadians. I am convinced that the majority of them believe we are acting to protect their future retirement.

Lastly, I hope that all members of the House will support the government and will vote in favour of Bill C-78.

Mr. Speaker, I am pleased to rise this morning to take part in this initial debate on Bill C-78, an act to establish the public sector pension investment board, to amend the Public Service Superannuation Act, the Canadian Forces Superannuation Act, the Royal Canadian Mounted Police Superannuation Act, the Defence Services Pension Continuation Act, the Royal Canadian Mounted Police Pension Continuation Act, the Members of Parliament Retiring Allowances Act and the Canada Post Corporation Act, and to make a consequential amendment to another act.

I listened to the minister's comments with some interest. In his concluding remarks he mentioned that he felt this legislation was fair. I suspect it would be most fair for the government in its administration of the affairs of Canada, and perhaps least fair for the Canadian taxpayers. On that basis I would like to focus the majority of my time today speaking to several of the technical aspects of the bill before us. I am sure that a number of my Reform colleagues later today will focus on other specific aspects of the legislation.

The purpose of this bill is to establish an independent public sector pension investment board with a mandate to invest employee and employer pension contributions that were made under the public service, the Canadian forces and the Royal Canadian Mounted Police pension plans.

This bill, if passed, will become effective on April 1, 2000. It would also allow the Canada Post Corporation to establish an independent pension plan by October of next year.

This bill would amend these present plans so that the employee contribution rate under each is set independently from those under the Canada pension plan. It would de-link the CPP from these plans, as it was originally linked when the CPP was established. Employee rates under each plan would be frozen until the year 2003, but would rise from 10% to 40% of the cost of the plans in the year 2000.

While the government would pay 60% of the cost, it would also claim all of the surpluses. While the government would be responsible for all actuarial deficits, and we can expect that there will be actuarial deficits in the years ahead, the main benefit to the government would be the ability to claim the present $30 billion surplus. I will talk about that a bit later.

The three existing pension advisory committees would be changed so that employees would have some say in the design, administration and funding of the plans, and there would be employee representatives on these committees. I try to give credit where credit is due, but unfortunately this bill does not go far enough. In the balance of priorities it falls short. Employee representation is a far cry from the employees administering the funds, and that is not what we are calling for. Would the advice they offer be accepted or rejected? What influence would they really have? Is this mere window dressing?

Other proposed changes include improvements to life insurance components of the public service plan and the extension of survivor benefits. This is again on the plus side. This includes the extension of benefits to same sex partners, but it does so without any reference to gender. The convoluted wording and the ambiguity in the bill in this respect is unacceptable. When reading this section of the bill we do not really know what the government means at all with respect to who is entitled to benefits.

The cost of extending survivor benefits is not large, but rather small, amounting to a quarter of one per cent or approximately $5 million a year. However, as I am sure members are aware, these changes have been anticipated for some time now and like many of my colleagues I have received correspondence on this issue from concerned pensioners who are worried about the proposed changes. There has also been a significant amount of press coverage on this issue. I am sure that as we debate this issue over the next few weeks we will hear even more from people who are concerned about the proposed changes in Bill C-78. I invite Canadians to continue to raise their concerns with their members of parliament and with the government itself.

For those who are unaware of why this is such a volatile issue, I can sum it up in one word, “surplus”. There is a $30 billion surplus on which the government is itching to get its hands.

I recently read Paul Polango's book, The Last Guardians: The Crisis of the RCMP and Canada . He makes an interesting point. In the funding he shows that in the years 1996-97 the budgeted costs for the RCMP were $1,925,700,000. The receipts, though, which do not go to the RCMP but into general revenues, come to almost three-quarters of a billion dollars. Therefore, instead of $1.9 billion it comes out to $1.2 billion as the net cost of the RCMP to the government. This is not really reflected in the costs of the RCMP because revenue to the RCMP is not balanced off against its account but goes into general revenues.

In a sense that is what is happening here too. It is estimated that the surplus for this pension plan hovers at about $30 billion. With the way in which this pension is structured the money is more like a paper IOU rather than ready cash, but it still accounts for approximately one-fifth of the government's massive $6 billion debt.

Over the past decade the government has already raided approximately $10 billion of the surplus and used that money to help to reduce some of the huge deficit racked up during the high spending eighties and nineties while still allowing for the wasteful spending of taxpayer money on programs such as the great Canadian flag giveaway.

Like they are doing with the massive employment insurance surplus that has built up in recent years, government members are saying this money is theirs and they have a legitimate claim to take from this fund whenever they need a little extra cash because they would be responsible for shortcomings in the future. They fail to take into account, however, the burden the taxpayers have carried in helping the government overcome the difficulties it had resulting from its shortsighted and cynical attempts to decide for Canadians what is best for them.

Organized labour representatives, on the other hand, state that this is their money as their members have contributed to the plan in the past and will need the funds in the future. The money should be theirs, they say. They are calling what the Liberal government is doing legalized robbery. Some have even taken legal action or have threatened to take legal action to stop the government from taking these surplus funds. At this time I note that the existing legislation Bill C-78 would amend does not address who has any right to any surplus.

The unions are also upset that the government is not only raiding the surplus but is at the same time raising premiums. Under the bill the employee contribution would rise to 40% of the total contributions to the pension fund. The unions are supportive of their members paying their fair share of pension contributions. These changes will bring it more in line with other pension plans. They are in agreement that with more benefits the rise in their members' share of the contribution is acceptable. However, with the government's decision to take the surplus in the pension fund, the unions feel that the government has crossed the line of what is acceptable.

It is the position of the official opposition that these surpluses belong to neither the government nor outright to the unions. It is the taxpayers who are the forgotten partner in this debate. It is the taxes they have paid over the years that give the government the money it has to satisfy its 70% obligation to these pension contributions. Taxpayers have also over the past few years helped pay down the federal deficit and now the debt, with the enormous taxes the government has forced upon them. In the past taxpayers have covered $13 billion shortfalls in the pension plans and are on the hook for any future shortfalls.

The government is wrong to raid this money from the pensioners who have contributed to this fund over the years, as have Canadian taxpayers contributed to this fund. We believe that the fair and smart thing to do with the pension surplus is to leave it inside the pension plans, not only to guarantee the solvency of the plans for the members but to cushion taxpayers from any potential shortfalls in the future.

Although the current surplus is quite substantial, there still exists a strong possibility that it will be eroded so far that the pension fund will go into a deficit position. It has happened before and it will very likely happen again given the volatility of the global economic environment.

The bill would establish the public sector pension investment board, a 12 member board situated in the national capital region. It would be mandated to manage the funds in the best interest of the recipients, ensuring a maximum rate of return on the money that would be transferred to the fund, as stated in the bill, from the Canadian Forces Superannuation Act, the Public Service Superannuation Act and the Royal Canadian Mounted Police Superannuation Act. That varies from the current way plans are managed. They are currently in long term government bonds, which in reality provide very little return.

The board would manage or supervise the management of the business and affairs of the funds administrators including an annual written statement of investment policies, standards and procedures for each fund they manage; monitor the officers of the board to ensure that they meet these standards; prepare both quarterly and annual financial statements for each fund they manage; set up conflict management procedures; establish a code of conduct for officers and employees of the board; and have someone monitor both the application of this code and any conflict of interest procedures. These are all described in considerable detail in the bill.

Members of the board and the officers who are delegated by the board would have the obligation to act honestly and in good faith with a view for the best interest of the funds and to act with care and diligence. They are to bring with them any outside related knowledge, skill or education that they have and employ that in the best interest of the board in the application of their duties. The directors and officers are to abide by all the bylaws and guidelines that have been established by the board.

If a director, agent, officer, employee or auditor of the board or subsidiary makes a false statement or gives deceptive information, he or she would be guilty of an offence and could be liable on summary conviction for a jail term of less than a year and/or a fine of $100,000.

Bylaws may be made by the board if they are consistent with the act in assisting or guiding the conduct and management of the board's business and affairs. They can deal with the board's administration, management or control of their property holdings; the calling of meetings; the functions or duties of directors, employees or officers; and the establishment of committees.

Bylaws will be in effect when passed unless otherwise stated and are to be given to the respective ministers and will then be forwarded to parliament.

The act also sets up the power to delegate certain powers or duties of the board of directors. However, there are specific limits as to what cannot be amended such as the adoption, amendment or repeal of bylaws; the establishment of investment policies and standards; any vacancy; the remuneration of board members; or the approval of any financial statements of the board.

The nominating committee would be established by the President of the Treasury Board after consulting with the Minister of National Defence and the Solicitor General of Canada. It would be chaired by an independent chairperson who has not or is not entitled to pensions from either the Canadian Forces Superannuation Act, the Royal Canadian Mounted Police Superannuation Act or the Public Service Superannuation Act.

Other members of the nominating committee are to be chosen as representatives from the public service, the Canadian forces or the RCMP. Nominating committee members could be reappointed after their five year term expires and removed at any time by the minister who appointed them. Nominating committee members would have a variety of influences which would aid in the guidance of their decision including the disqualifying factors they should look for in directors.

The act also sets out a formula for the selection of directors who would be appointed by governor in council on the recommendation of the minister from a short list submitted by the nominating committee. Directors would hold their office for a renewable term of three years and could be removed by an order in council. There would be staggered terms of office so that no more than one-third of the board's term would expire in the same year.

The act also sets out the guidelines for the resignation, vacancy and remuneration of board members, as well as the structure for the appointment, duties and removal of the chairperson who is to be chosen by the responsible minister.

The act is very specific in stating who cannot be considered as board members, listing several instances in which individuals are considered disqualified persons. They include individuals who are under 18 years of age, those found to be of unsound mind by the court, an agent or employee of the government, an MP, senator or provincial politician, an individual who may receive or has received pension benefits that are covered by this act or from the consolidated revenue fund, an employee or agent of a foreign country, or a non-resident of Canada.

As we have seen so many times since the government began its mandate, the opportunity exists with this legislation for the government to use the board as a patronage reward for those who have supported the party in one way or another.

The government insists that the board is to be independent and at arm's length from the government. However, like we have seen time and again with the government, it does not always honour its word in this respect. I am hoping that I am being a bit cynical. However the Liberal past practice in this regard has been most disappointing. The high degree of cabinet and ministerial discretion this act allows makes it hard for me to believe that they will not take advantage of this as another patronage opportunity.

The fiscal year of this board would be the same date as that for the government. Bill C-78 would establish the procedures and parameters for the financial books and systems of the board. They are to have quarterly and annual financial statements that are to be approved by the board. There is also to be an auditor chosen annually by the board of directors to audit the financial statements of the board in accordance with acceptable accounting procedures. One wonders what the definition for acceptable accountable procedures would be considering the debate now going on between the government and the Auditor General of Canada.

The auditor of the funds could be removed at any time by the board. The bylaws are to be made public and are available at the board office. The auditor has access to any documents from current or former board directors, officers, employees or the like in the preparation of the audit.

The ease with which the board could change or dismiss auditors is a concern for me. I am concerned that the board holds the power to change auditors at its whim, which may not be in the best interest of pensioners. The manner in which it can appoint and change auditors also does little to ease my concerns about the accountability both to parliament and to the pensioners to whom the board should be ultimately responsible.

The quarterly financial statements are to go to the responsible minister, as well as to the minister of defence and the solicitor general, within 45 days of the end of that quarter. Annual reports are also to go to these ministers within 90 days after the end of that fiscal year and are to be tabled in parliament no later than 15 days thereafter.

This annual report is to include the financial statements, the auditors reports as well as the objectives of the board for the past year and for the foreseeable future. A summary of its policies, standards and procedures; its code of conduct for officers and employees; and the report of any special audit is also to be included in the annual report.

Other than the annual report there is little reporting to parliament. I have some difficulties with this especially considering the high degree of power the minister and the cabinet have with relation to the establishment and the operation of the board.

The board in effect is entrusted with the pension funds of some 300,000 retirees and 345,000 members of the federal public service. I would have liked to have seen more accountability to parliamentarians in the bill so that we could ensure the best interest of pensioners affected are indeed being looked after. With the government priority to raid surplus funds, what is the government's priority for its retirees? As I mentioned throughout my speech today I have serious concerns about the overall lack of accountability to the pensioners covered by the legislation.

Another area I would like to briefly highlight today and will elaborate on during later stages of the debate is the exemption of the legislation from the information sought through the Access to Information Act. Why is the government so afraid of public scrutiny? What is being hidden?

What is intended to be kept from public scrutiny? This secrecy is very disturbing. This does not ensure us that the board members are totally accountable. By not having access to this very important tool, the Access to Information Act, this legislation is not as transparent as it must be. I believe the government should seriously reconsider this omission and make the Access to Information Act available through this legislation.

Also in this bill, the minister may appoint an auditor to do a special audit on the board or subsidiary, or may also cause a special examination to be carried out to ensure that it has met the requirements of the act. This special examination must be carried out at least every six years, and before this takes place, the minister must consult with the minister of defence and the solicitor general. The cabinet may also make a variety of regulations respecting the application of the board and subsidiaries.

The Reform Party of Canada is opposing the bill. I would like to outline five significant reasons, among many, why I will be opposing the bill. I will summarize them.

First, the bill allows the government to raid the fund's surpluses beginning with the existing $30 billion surplus. This raid reminds me of the infamous national energy program where the federal government helped itself to an excess of $60 billion of petroleum revenues that belonged to the affected provinces, primarily the province of Alberta. Bill C-78 gives the federal government authority to claim pension money for its general revenues and, in effect, another surtax on public service employees and Canadian taxpayers who are contributing to these pension funds.

Second, the bill would give the government authority to provide new same sex benefits without debating family and same sex relationships that would be affected. I think this is a back door way of dealing with the issue, and it is not acceptable. Public policy must be changed in the open and not in the back door through a bill like this.

Third, the bill provides an open door for the government to make unchallenged patronage appointments.

Fourth, while the bill would provide parliament with after the fact reports from the minister responsible, altogether too much business will be conducted behind closed doors with no provision to use even the Access to Information Act. Such secrecy is not acceptable.

Fifth and last, why is the auditor general not the auditor given the mandate to annually audit this fund and the administration of these funds? Why is it not in the open for the auditor general to make his examination and report to parliament?

These are changes that I believe need to be made.

I would, therefore, like to move a motion at this time. I move:

That the motion be amended by deleting all the words after the word “That” and substituting the following therefor:

Bill C-78, an act to establish the Public Sector Pension Investment Board, to amend the Public Service Superannuation Act, the Canadian Forces Superannuation Act, the Royal Canadian Mounted Police Superannuation Act, the Defence Services Pension Continuation Act, the Royal Canadian Mounted Police Pension Continuation Act, the Members of Parliament Retiring Allowances Act and the Canada Post Corporation Act and to make a consequential amendment to another act, be not now read a second time but that it be read a second time this day six months hence.

Madam Speaker, I welcome this opportunity to express my opinion and that of the Bloc Quebecois regarding Bill C-78, which was just tabled by the government, and the amendment that was just moved by the Reform Party member.

I first want to quote many people who wrote to us to express their disgust in seeing the government try to get its hands on the pension fund surplus to which they contributed and still contribute.

I am asking the ministers to listen carefully. This is a rare opportunity for them to be in contact with the reality in this country and to learn first-hand what voters think of their government.

The letter to which I am referring begins like this:

The government wants to plunder my pension fund.

I should point out that it is the author of that letter who uses the word “plunder”.

Personally, I think this pride has definitely taken a beating recently. I will go on reading this letter, which was written by a Quebecker whom I will not name, because I did not have the time to contact him to ask for permission.

It is not always easy because, as is now the case, the public service is the target of ambitious but petty politicians, such as—

He then gives the name of the President of the Treasury Board, which I obviously will not read. The letter goes on:

Our salaries have been frozen and the government has passed arbitrary back-to-work legislation instead of negotiating fairly.

What does the writer conclude?

We are still the victims of political ambition.

And he goes on to say:

The Minister of Finance wants to become Prime Minister.

It is no longer any big secret that the Minister of Finance wants his boss's job. The writer then says the following about the Minister of Finance:

He has his eye on the pension plan surplus, which he sees as easy money for lowering the national debt. He wants to make a name for himself as the one who lowered the debt.

The government should listen to this message. It is an impassioned plea from a public servant who is fed up with the government's offhandedness.

He continues:

It is unfair for the government to put its hands on the public service pension plans in order to reduce the debt.

We cannot do otherwise than to agree with this. The author of this letter adds:

Unless it also proposes to do the same to the surpluses in a number of private plans.

I wonder: is this prophetic? We shall see.

In the meantime, I would ask you to listen to the way the author ends his letter—and he has taken the trouble to underline these words, which goes to show how important he felt that his message was:

Tell these arrogant characters to keep their hands off my pension fund.

I will repeat this message, so that everyone will understand it clearly:

Tell these arrogant characters to keep their hands off my pension fund.

It is clear. I want this Quebec public servant to know that he is not the only one opposed to the government's attempt to get its hands on his pension fund. We are vehemently opposed to a number of the reforms proposed by the government in Bill C-78.

This bill is supposedly designed to ensure the long-term viability of the public sector pension funds. This is an in-depth reform of the administration of these funds as we now know it. The bill is going to modify the way plans established under the Public Service Superannuation Act, the Royal Canadian Mounted Police Pension Act and the Canadian Forces Superannuation Act operate.

The focal point of the legislation is the creation of the Public Sector Pension Investment Board to be responsible for administering the pension funds, which will in future be partially invested in the stock market. The government is announcing that the bill is improving the financial management of pension funds and employees' and retirees' benefits.

Obviously, blinded by its own all too obvious arrogance, this government was not going to reveal all the unfortunate consequences of this bill to us. Should everything in this bill be pitched? No. It even contains some good ideas and some good initiatives.

The bill in fact contains some things that will improve the situation of workers in the federal government. Former employees, now retired, will also enjoy certain benefits.

The first improvement is in the number of years of service used in calculating the basic benefits a retiring public servant is entitled to. At the moment, basic benefits are calculated on the salary of the six best years of uninterrupted service. The calculation will now be based on five years, rather than six.

I would also point out the change in the formula for calculating the public servant's pension benefit to shrink the amount of the pension benefit reduction when he reaches age 65 and receives as well his Quebec or Canada pension.

The main positive change involves the investment of contributions in public markets. For a long time now, a number of stakeholders, including employers' organizations, have been suggesting that pension funds be invested on the stock market. That is already being done in a number of countries, and the return on this sort of investment is higher than if the money had remained in government coffers.

In 1994, the Auditor General of Canada examined the connection between the management of our debt and employees' pension plans. In his report, he pointed out the following:

Financial managers, actuaries and government officials generally agree that, in the long term, a diversified market security portfolio generates higher rates of return than the interest credited to pension accounts.

The auditor general even retained the services of consulting actuaries to compare the theoretical return on investment of the pension fund on the markets to the investment strategy in notional bonds, which was adopted for pension plans during a 31 year period, from 1959 to 1990.

These consulting actuaries came to the conclusion that a market investment strategy would have generated higher annual rates of return, by 1.5% to 2.3%.

That component of the reform should ensure a higher return than the existing rate for the public service pension plan. This is a step in the right direction, since the bill will ensure a return that will more closely match that of private pension plans. There will be an independent fund with real money in it.

But—and there is always a but—this is by no means the perfect solution. Some provisions of the bill must absolutely be amended to avoid future disputes between the government and its employees.

First, there is the appointment of the directors of the board. The President of the Treasury Board will appoint eight people who will form a selection committee. These eight people will provide a list of names to the President of the Treasury Board, who will recommend 12 of these people to the governor in council who, in turn, will appoint them directors of the board.

The problem is that while the bill provides that the employees' representative is appointed to the selection committee, there is no requirement for the President of the Treasury Board to then recommend that person for the position of director.

Let us see who the other members of the committee are. There is a chairperson appointed by the minister after consultation with a few other ministers concerned, specifically the Minister of National Defence and the Solicitor General of Canada. All signs are that this chairperson will be a friend of the Liberal Party and not an employee.

As for the other directors, it is more of the same, because there is only one public servant on the nominating committee. The government will not saddle itself with such a person on its board of directors if it does not have to.

I would suggest that the government follow the example of the Caisse de dépôt et placement du Québec. In addition to the director general of the Caisse and the president of the Régie des rentes du Québec, the Caisse's incorporating statute provides for nine other individuals to sit on the board of directors. Of these, two must be public servants or directors of a government body, another must be a representative of an employee association, and another must be a director of a co-operative.

Clearly, the composition of this board of directors is much more representative of the various stakeholders in the business world than what the federal government is paving the way for with Bill C-78.

One of the shortcomings of this bill is the lack of predictable representation of beneficiaries of the pension plans operated by the future fund.

Another shortcoming has to do with the use of any future fund surpluses. Bill C-78 amends the Public Service Superannuation Act by adding, among others, clause 44.4, which will leave the government free to take three possible courses of action in the event of a surplus.

First, it will be able to reduce employee contributions for the period that the minister determines. Second, it will be able to reduce Treasury Board contributions in the same manner. Finally, the surplus amount the Treasury Board determines may be paid out of the Public Service Pension Fund and into the Consolidated Revenue Fund, still on the minister's recommendation. Our fear is that this way of operating will turn the future fund into another cash cow for the federal government.

I am not in any way imputing motives to the government, for it has already stated its intention to get its hands on the surpluses in the public service pension plans. Public servants are continually calling for the government “not to be allowed to get its hands on our surplus”, while the Treasury Board is busy manoeuvring in order to be able to do just that.

These surpluses are estimated at more than $30 billion. As at March 31, 1998, in other words more than one year ago, the public service pension plan reported a surplus of $14.9 billion, the RCMP's plan $2.4 billion, and the Armed Forces' plan $12.9 billion, for a total of $30.2 billion.

This is a lot of money, and obviously it could repay part of the debt, or fund phase II of the millennium scholarship program. Obviously, getting its hands on such a sum would—as my correspondent whom I have just quoted pointed out—allow it to score a lot of points politically.

But the government is wrong. The minister responsible for the public service is wrong. By getting its hands on its employees' superannuation funds, the government is trying to score points politically. This approach did not succeed when it got its hands on the employment insurance fund.

It is immoral for the government, which happens also to be the legislator, to take advantage of the fact that there are no legislative provisions relating to the present surplus to dip its fingers into it.

At the present time, there are 275,000 people paying into the fund, 160,000 government retirees, and 52,000 surviving spouses, who are watching the government meddle with their pension funds. It is true that there is a legislative vacuum when it comes to handling the present surplus. The legislation to remedy that lack ought to call for part of the surplus to go back to the employees and the pensioners.

The government recently tried to justify its argument that any surplus belongs to it, because it is the one guaranteeing that public servants will get a pension. Indeed, the President of the Treasury Board recently explained that, since the government has had to shell out money in the past to ensure that public servants would have a pension when there was a deficit in the fund, it is only normal that the government should get any surplus. This is absolutely not true.

The normal thing to do would have been to lower employees' contributions, particularly when it was realized that a huge surplus was accumulating.

The argument used by the President of the Treasury Board is also indicative of inadequate management by this government. Indeed, there is every reason to think that if, a few years ago, the government had set up a real retirement fund and had invested the money on the market, there would have been no deficit, or hardly any.

In fact, the Auditor General of Canada came to that conclusion in one of its reports released in 1994. He wrote, and I quote:

The higher rates of return that the pension accounts could have earned, had a market investment strategy been followed over the long term, could have substantially reduced or totally eliminated these actuarial deficits.

Consequently, the deficit and debt accumulation could have been lower if a market investment strategy for the pension accounts had been followed from the start.

Many employees have been asking for a long time that their superannuation fund be invested on the stock market, something that the government has so far refused to do. Now, these employees are being relieved of their fund.

The government should be careful, because it is sending two negative messages to society. First, it is telling the public that it does not believe in fairness. In this particular case, fairness requires that part of the current surplus be applied to the pensions of current retirees.

The President of the Treasury Board is certainly aware—but are the other members of his government?—that the average annual pension benefits paid to former government employees is $9,680. These pensioners will not get rich on that kind of money.

In addition, the government is telling other employers that it is alright to use the money in their employees' pension funds. For instance, a municipality might have a road to build but not have enough money to finance the project. What could it do? it could use its employees' pension fund. A company might wish to eliminate a recent deficit. What could it do? It could dip into its employees' pension fund. The federal government is setting a dangerous precedent that may affect labour relations in Quebec and in Canada.

Starting today, the government must follow the example set by one of its own backbenchers, the member for Thunder Bay—Atitokan, who wrote in The Chronicle Journal as recently as March 29 that the government was again going to meet with public service employee representatives on the issue of pension fund surpluses in order to come up with an agreement acceptable to both parties. The member concluded his letter with the statement that he was confident that such an agreement would be worked out.

There is no doubt that the member for Thunder Bay—Atitokan, like many others in his party who dare not express their views for fear of being sidelined, will lose their trust in this government that refuses to negotiate with its employees, the most basic form of civic-mindedness.

So as not to lose the often too-blind trust of its party members, and the slowly but surely declining trust of the public, the government must scrap the provisions in its bill that allow the unilateral diversion of $30 billion in surplus pension funds.

In addition to helping those who are now retired, future negotiations between the government and public service employees would lead to the conclusion that it is a good idea to transfer the present pension fund surplus into the retirement fund this bill sets out to create. The new fund would thus have start-up capital. This is the only way of ensuring the fund's viability vis-à-vis the many challenges it will have to face.

One of these challenges is the imminent retirement of the many baby boomers. The pension fund will be hard put to keep up. We must, however, remember that the current hiring rate in the public service is fairly low and that, accordingly, fewer workers will be paying into the fund.

The future fund must have a reserve of its own, in order to provide for a possible and probable need for money. Transferring the current surplus would seem appropriate to fill this role. The surplus will serve as well to cover unavoidable losses from investments in the stock market.

We will recall that a number of investment firms suffered in the recent Asian crash, primarily those whose portfolios were not sufficiently diversified. Even the auditor general's report for 1994 shows that, according to his findings, in certain periods—from 1970 to 1974 and from 1985 to 1990—a market investment strategy might not have produced the best results. It would have been useful to have a little room to manoeuvre, a bit of a surplus.

For these various reasons, I hope the government will return to bargaining with its employees rather than try to have this bill passed. It only partly resolves the current problems of managing a pension fund. Accordingly, the government can make off with the money, no doubt causing increased tensions between the government and its employees.

“Tell these arrogant individuals not to touch my retirement money”, said the letter I read earlier.

So, I am passing the message along to the President of the Treasury Board: “Do not unilaterally take over the surplus in the pension fund. Instead, put your bill on the back burner, while you reach an agreement with your employees on how to use the surplus. And, most importantly, stop governing autocratically”.

Mr. Speaker, I am happy to speak to the motion and to the amendment to the motion. I firmly believe that the hoist motion was a very good idea because six months time may add some measure of reason to what is going on. I am confident that within six months the two parties may reach the outcome that there be a negotiated settlement on what to do with the pension surplus in question.

I believe that the President of the Treasury Board is in for the fight of his political life if he continues on the road of moving forward with Bill C-78. In the short time I have been here I have not seen the firing up of so much interest over an issue. The idea of taking, clawing back, or whatever we want to call the grab for the $30 billion surplus is such an emotional flashpoint with so many people across the country. I predict interest of the kind we have not really seen since Brian Mulroney tried to deindex the Canada pension plan.

When Brian Mulroney tried to deindex the Canada pension plan he started a grey hair revolution, a blue rinse uprising of senior citizens who demanded that it be stopped. Brian Mulroney and his government to their credit had the common sense to back off. They did not want to take on that group of people. They are the most powerful voting constituency in the country. Senior citizens, pensioners and retirees are well organized, well informed and they vote. They do not stay at home and grumble. They get on their feet, come out and vote at voting time. They are gearing up around this issue. As I said, I have not seen a level of interest like this on any issue since I have been here.

Today seniors organizations are on the hill. They are paying close attention to the first day of debate on Bill C-78. The Armed Forces Pensioners, the Association of Public Service Alliance Retirees, the Canadian Association of Retired Persons, the CLC, the Canadian Pensioners Concerned, the Congress of Union Retirees of Canada, the Federal Superannuates National Association are all here. I did a quick tally and they represent over 1.5 million retirees and pensioners. They are watching this debate in West Block in a room which I rented for them.

I really believe that the hoist motion is at least the first glimmer of hope that possibly we can add some voice of reason to this whole debate.

I did not finish the list. There are others, the Royal Canadian Mounted Police Veterans Association, the United Senior Citizens of Ontario Incorporated, the Ontario Coalition of Senior Citizens Organizations, the One Voice Seniors Network, and on and on. Do the President of the Treasury Board and the government really want to take on those people? They should think twice.

When the talks broke down it led to the introduction of this legislation. But the talks were not going that badly. Progress was being made. Virtually all of the clauses in Bill C-78, in the hundreds of pages of text, were agreed to by both parties. Some benefits were increased. Obviously the representatives of the pensioners were pleased about that.

Virtually everything else was agreed to, with the exception of this enormous, and I will avoid unparliamentary terms, grab of $30 billion from the pension fund. I suppose the representation of the pension investment board was another hot point. But these were not insurmountable.

The representatives of the pensioners were quite yielding in their arguments. It is a basic tenet of the trade union movement that all pension surpluses are the sole property of the employee. They are not the employers' money to use as they see fit. They are deferred wages. It is our money, speaking on behalf of working people.

The representatives of the employees at the table were willing to move on that. I have heard figures. I will not mention them here but they were willing to share that $30 billion, some going to improve benefits and some going back to the employer to use as they saw fit, but not all of it. That is where the impasse arose with the $30 billion. There was no hint of increasing benefits to the retirees.

The previous speaker did a good job of pointing out what these retirees are really making. There are more women in that beneficiary group than there are men. The average woman with 20 years of service makes a pension of $9,600 a year. Whoopee. It is a pension and I am sure they are glad to have a pension but it is not exactly a fat, lucrative pension.

This $30 billion divided among all the beneficiaries would be $30,000 a year for each of them spread out over the term of the period they collect. That could make a significant difference between living in poverty or living in some kind of financial security during their senior years.

It is ironic the theme the government chose for international women's day this year. Because it is the year of older persons the government chose “going strong, celebrating older women”. It should be “going wrong, robbing older women” because that is what the government is doing with this $30 billion grab of the pension surplus.

Bill C-78 is a history of failures. It is a failure to negotiate. It is a failure to reach a conclusion by negotiation which was within reach. It is a failure to manage the workforce adequately. It is a failure in developing satisfactory relationships with employees where the government could deal with an issue like this at the table as civilized people as should be done. It is a failure of epic proportions to live up to the promises of former Liberal governments.

Les Barnes, a former PIPS leader, wrote a letter to the editor. Mr. Barnes was present in 1967 when a firm guarantee was made by the Pearson government that the terms and conditions of the plan would never be amended by unilateral government action. Never. That was the trade-off to keep it off the bargaining table.

Pensions are usually part of the collective bargaining process but the government wanted it removed and separated. The government did not want it to be dealt with at the bargaining table. Okay, it was a deal. It was an arrangement, a pact, a contract. The government would not talk about pensions at the bargaining table and the terms and conditions of the plan would never, ever unilaterally be altered. It is being done today in Bill C-78 and done very dramatically.

Mr. Barnes also talked about the Minister of Finance at the time, Walter Gordon, who wrote to the national joint council of the public service assuring its members that as a result of the integration of the plans, which is what they were trying to achieve then, there would be no increase in the rate of contributions.

Bill C-78 is jacking up the rate of contributions by 33%, from 30% of the total contributions to 40%, one-third of an increase. The government is jacking up the contributions and taking the surplus out in one fell swoop. It is no wonder the seniors movement is mobilizing and building up a good head of steam to come to Ottawa and tell this Liberal government what they really think of Bill C-78.

The minister made a very good and revealing speech. One of the first remarks he made was that Bill C-78 is part of an overall plan. You are darn right it is part of an overall plan. The government takes $25 billion out of the EI fund from unemployed workers and then it takes $30 billion from retired senior citizens, many of whom are living on an income of $9,600 a year. It is a plan all right.

The Liberal government is going to pay down the debt on the backs of the most vulnerable people in the country, unemployed workers and senior citizen women. My mom is one of those senior citizen women. She is 82 years old and is living on a public service pension plan. She is glad to have it but she is not exactly living well. Who is next? The government will be stealing pencils from blind men's cups. It is getting ridiculous when we think of the choices the government is making in terms of the grabbing it is doing.

I talked about the Pearson years and so on and the current Prime Minister was part of that cabinet. He was a part of the promise to not ever unilaterally alter the terms and conditions of the plan.

In 1991 and 1992 the dialogue really began to amend this plan to make the changes that everybody agreed were necessary. At that time the union agreed to the private investment board, the 12 person board that was talked about earlier. Had we reached agreement at that time and started investing privately, God knows where that plan would be now. Those were some very good high interest years. That $30 billion might be $100 billion and we could really make some changes to the benefits.

In 1996 the advisory committee made a report and it struck another committee, a consultation group to start fine tuning things. This is when the issue of the use of the surplus came to a head. In the last month of 1998 the consultative group broke down over the surplus and representation. Then in March 1999, rather than trying to pull the pieces back together, Bill C-78 was sprung on us. Really, it is an abrogation. It is an admission of failure or an admission of inability on the part of government to manage its concerns.

I could talk about all the nuances of the bill and a few of its good qualities. I will point out the things the retirees are glad to see in the bill.

There will be a dental plan for the first time ever, albeit a lousy dental plan because it has a $200 deductible. I have been dealing with employee benefit plans all my working life as a manager of these plans and as a negotiator of union agreements. I have never seen a $200 deductible in a dental plan in my life. I do not know what kind of deal has been made or who the carrier of that plan is.

The recognition of same sex couples we applaud fully. We are extremely critical that the government tried to sneak this in and wrap it up in a package of things that obviously no working person can support. It has been rolled in there to make it very difficult. It is a very cynical way of dealing with the good and the bad aspects of the bill.

The increase going from six years down to five years with two years vesting, all these things obviously we can support.

The big problem clearly is the use of the pension surplus and I will try to limit my remarks to that.

The problem lies in the attitude of senior officials and the minister himself. Here is a quote from Alain Jolicoeur, the chief human resources officer of the Treasury Board Secretariat in 1998. He said “Employees and retirees have no proprietary interest to the surplus in the superannuation plan”.

Plain and simple, we are that diametrically opposed. We argue that all pension surpluses are the sole property of the employees to be used only for the improvements of benefits. That is what the whole purpose of a pension plan is. The other camp is diametrically opposed 180 degrees and says there is no proprietary benefit.

This argument is arrived at through a very convoluted bit of logic that the minister used again today. I would like to explain how the government arrived at this position that it assumes part of the risk. It assumes all of the risk for a deficit in the plan, ergo if there is any profit in the plan it is the government's to keep.

I would like to quote from a letter from Bob White to the President of the Treasury Board which was written in March. He puts it very well in one simple paragraph:

Typically employers have tried to justify the removal of surpluses on the grounds that because they take the risks involved in providing defined benefits, therefore they should get the reward of the surplus in the form of surplus removal or lower employer contributions. This commonly articulated relationship between risks and rewards is far too simplistic for two reasons. First, the actuarial assumptions that are used to value pension liabilities are chosen with a deliberate view to making experience gains and surpluses far more likely events than the losses and unfunded liabilities. Thus, the risk for which a surplus is supposedly the reward is limited. Second, if experience losses occur and employers are stuck with unplanned amortization payments, it is impossible to prevent the employers from lowering either the pension benefits of other parts of employee compensation from the levels they would otherwise have achieved.

In other words, the downside risks may be shifted to the employees despite appearances to the contrary. Really, there is very little downside risk.

The way the actuarial experts deal with plans, especially in a privately invested fund, it is far more likely that a surplus will occur than a deficit in the plan. I would say 10:1 and I am pulling that number out of my hat. If the tradeoff is “I will keep all the surpluses, but if there is a deficit, I will assume the risk there too”, that is a very good bet, frankly. In a gambling hall that would be a very safe bet to undertake.

That is really the issue. That is what is going to fire up the country. It is only just beginning. This is day one of what will prove to be a very long debate. We are talking about a huge amount of money. We are talking about an amount of money that could make a huge difference in the lives of the beneficiaries of public service pension plans.

We should put some of the facts on the record. As of March 1998 the public service pension plan had a $14.9 billion surplus, the RCMP plan had a $2.4 billion surplus and the Canadian forces plan had a $12.9 billion surplus. We should think about how we arrived at such huge surpluses. Nobody should be so bad at his or her actuarial research to arrive at such sloppy work.

The government did some very obvious things which led to very predictable consequences. The government froze people's wages for seven years. Obviously, the pension people receive when they retire is going to be a heck of a lot lower if the wages are that much lower for that period of time. It is kind of a double whammy, and even more so for women. When the government refuses to pay up on pay equity, obviously the women's pension calculations will be a heck of a lot lower than they would have been had they been receiving fair wages the whole time. There has also been a lower than expected rate of inflation. We have an actuarial anomaly to wind up with this huge pension surplus.

I will talk about the net effect this whole thing is having on the morale of the public sector. This is a group of workers which has suffered indignity after indignity. Most people go into the public sector for a couple of reasons. They are willing to accept lower wages because they trade it off for job security. After all the cutting and hacking and slashing and butchering of the public sector there is not a whole lot of job security left. The sword of Damocles is hanging over their heads every minute. Job security is out the window. There is no longer any reason to work for the public security if job security is what you are after. Let us face it, everybody is afraid for their jobs.

Public servants are still plugging along. They can expect reasonable wage increases, but they have had six to seven years of no wage increases. They are falling way behind the private sector. Not only do they not have job security, what are they making? A carpenter makes eight bucks an hour less than an outside carpenter. I was a union carpenter making $25 an hour and the guys working for defence or wherever as carpenters were making $15 an hour. That is not bull. That was the difference.

At least people could take some comfort in the fact they had a pretty good pension plan. Pretty good? Nine thousand dollars a year for 20 years of service. That is not a pretty good pension plan.

Then, when there is an opportunity to sweeten the plan by taking that $30 billion and giving it to the people who paid for it, it gets taken away too. It is no wonder there is poor morale in the public sector. If people are concerned about productivity, or whatever the buzzwords are these days, that is certainly something they could look at because public servants are demoralized and browbeaten. The government is pushing people too far. That is all there is to it.

I raised the gender issue once before. This is very much a gender issue. There are more women beneficiaries than there are men, and for good reason. In the public sector there are a lot of clerical-type jobs.

We have to win the argument on the whole issue of why that money is ours. We think it is ours. Obviously the minister thinks the opposite. Let us look at why we would argue that it is ours.

If there is a surplus in a private sector pension plan, the law of the province of Ontario is that 90% of employees have to approve any employer use of the surplus. Clearly that contemplates that it is the employees' money. Why else would they be required to vote on giving it away?

The other evidence is that during public sector negotiations, at the bargaining table, the employer, time and time again, says, yes, they are getting lower wages and, yes, we will not provide much of a raise, but look at the great pension plan. It clearly uses the pension plan as part of the wage package. It uses it against the employees at the bargaining table and then reverses the argument when bargaining is over.

There is jurisprudence. Consider CUPE Local 1000 v Ontario Hydro. CUPE initiated a legal challenge in response to Ontario Hydro's attempt to take a contribution holiday and it won. It won fair and square because the employer did not have the right to use the contributions for anything other than the trust document dictated, which was to improve the benefits to the employees. It is there on the books and people should be looking at it.

Bill S-3, an act to amend the Pension Benefits Standards Act, received royal assent in parliament in June 1998. This legislation applies to private plans operating under federal jurisdiction. It requires a two-thirds vote of the employees before the employer is allowed to use a single penny of the plan for anything other than improving benefits.

That is some of the more obvious jurisprudence. I am sure there are many more who would argue that any pension surplus is the sole property of the employees who paid into the plan, whether the contributions are from the employer or the employee. It is part of the wage package. It is deferred wages for the employees' use and their use only.

Tony IannoLiberalParliamentary Secretary to President of the Treasury Board and Minister responsible for Infrastructure

Mr. Speaker, it is interesting to hear the hon. member give examples that are not relevant and do not have the same pension plan description.

I am sure the hon. member knows that this is a legislated plan that is guaranteed by the government so that all employees and retired persons will receive a pension regardless of the economic situation.

If there were to be a deficit, the government would have to guarantee it, as it did at the time of the $8 billion deficit. Does the hon. member think it should be shared risk? Should the union participate in the new plan so that, in effect, if there is a surplus it can benefit by it and if there is a deficit it will contribute toward it? Right now it is the Canadian taxpayers who guarantee public service pensions to ensure that people receive the kind of income that has been guaranteed for 50 years.

Mr. Speaker, when the hon. member talks about shared risk, one cannot help but talk about shared management. It has always been the goal of any pension plan to have joint trustees; representatives of the employees and the employer sitting on the same board, having some control and direction over investments made or the direction in which the plan might be going.

I know this was one of the sore points at the table when talks broke down in December 1998. The government would not allow any input from employees in terms of ethical investment funds or control of the types of investments that the new public sector investment board would make.

What if the investment board wanted to invest in a janitorial company which had contracted with the federal government to clean the Wellington Building and, as a result, put public sector plan members out of work? Frankly, under the board's fiduciary responsibility, if that janitorial company was paying on the stock market one quarter of a point higher than the other investment, it would be its obligation to invest there. There can be no other consideration than to maximize the profits of the investment.

Most plans are run that way, but many pension plans qualify the fiduciary responsibility by saying that there are secondary objectives which they are trying to achieve. Maybe it is job creation for the plan members, or rural or regional economic development. There could be any number of purposes. When dealing with tens of billions of dollars of investment on the stock market, it could be directed to achieve secondary and tertiary objectives other than purely profit objectives. That fell apart.

The shared risk or responsibility dialogue was taking place at the same time. There is far greater chance of there being a surplus than a deficit because of the actuaries who are hired to run the plan. The way that any well managed pension plan is run is that premiums are set at a rate which will offset the liability at the other end. Premiums will go up. In the near future we will not see deficits, but rather humongous surpluses.

Mr. Speaker, I listened with great intent to the member opposite. I am a little appalled by some of the statements that the member made specifically to try to stir up our seniors and to leave the impression that somehow their pensions are not guaranteed.

That is just not the way it should be done. I think the hon. member should go on record to correct that fact. We do not want to stir up people who, in good faith, have paid into the plan, have done the right thing and are counting on their pensions. He knows, or he should know full well, that these pensions are guaranteed.

Does the hon. member think it is appropriate to create this kind of mischief and fear among our senior population in this regard? Does he acknowledge that those pensions are in fact guaranteed and that we need not create this kind of fuss to stir up our seniors, as he is doing?

Mr. Speaker, nobody has to agitate or stir up the most powerful voting constituency in the country. They are well informed. They are well organized. They can mobilize well and they can vote. That is what I was pointing out. This government should be served notice that it should be very cautious about taking on this particular group of Canadians because it would do so at its peril.

Frankly, this particular voting constituency could bring the government to its knees if provoked, and I have every reason to believe that they are being poked in the eye right now. They are are being provoked.

At no time in my speech did I ever imply that the current defined benefit they are enjoying is at risk. What I was commenting on is that the $30 billion surplus that is going to be taken out of the plan could be distributed amongst those low income retirees and their level of benefit would improve. Frankly, it is a defined benefit and it cannot even be negotiated at the bargaining table. The tacit agreement between the Pearson government and the employees at the time was that negotiations would never involve the pension. The pension would be fixed and defined by the House of Commons, not at the bargaining table.

There was a trade-off. The promise was that government would never alter the terms and conditions of the pension plan unilaterally, as it is doing now by jacking up the premiums and taking out the surplus. It is a promise broken. It is an an agreement that has been torn up. That might be where the hon. member got mixed up, if he was not listening carefully.

Tony IannoLiberalParliamentary Secretary to President of the Treasury Board and Minister responsible for Infrastructure

Mr. Speaker, it is amazing how the NDP uses information. I am glad you understood what I was getting at when I could not find a word for “untrue” because that is not parliamentary language.

Nevertheless, in the legislation, as the minister stated earlier in his remarks, 7.5% is the number and it is not changing.

Having said that, I am curious if the hon. member believes that it is not important to get the best return for seniors, that it is not important to maximize their numbers. All he cares about is ensuring that the money is invested on a very “good feel approach”, as compared to seniors' concerns. Once they have worked and contributed to a pension plan, they want to be assured that it is there, and the government continues to assure them that that is the case.

On the other side of the coin, we want to ensure that we have the best possible management to get the best rate of return, so that, in effect, the taxpayers of Canada will not have to invest as much and will still give the pensioners their guaranteed amount.

Does the hon. member believe that the rate of return is not important to seniors and pensioners?

Mr. Speaker, certainly not. The trustees of any pension plan have an obligation to bring the best rate of return possible. That is their fiduciary responsibility.

All I am saying is that there are secondary objectives and that the beneficiaries should have some input into how that money is invested because some of the pensioners may not want to be making money by clearing out the last rain forest in the world, or in a sweat shop in Nicaragua that is using child labour, or any number of those things. The seniors deserve to at least be able to say “Only invest in ethical investment funds”, which may or may not give a worse rate of return. Frankly, the ethical investment funds are doing very well.

I would never argue that we could be casual or cavalier about the investment practices but the employees, as in most private sector plans, deserve to have some say in the investment strategy of this huge pool of money.

Mr. Speaker, it is with pleasure that I rise on Bill C-78. Let us be clear. The government suggests that the main objective of this legislation is to improve the financial management of the three public sector pension and superannuation plans. The government's intention is consistent with its intention since 1993 to further concentrate its power among a very few.

There has been a secular decline in the role of parliament in the decisions made that affect Canadians. It began actually in the late 1960s. This continues and in fact has been expedited by the government. Bill C-78 is a further example of the effort by the government to concentrate power in the hands of a very few.

Increased management by the government with this legislation is defined as increased control, increased power and increased domination. It is a common characteristic of every initiative undertaken by members of the government. The power that they want to increase for themselves comes at a direct cost to parliament and to parliamentarians.

The fact is that prior to this legislation any change in the contribution rate had to be approved by parliament. After this legislation that power will rest with the treasury board president at a time when Canadians are saying they want more accountability, more input, and parliamentarians need to have more responsibility.

I believe Mark Twain once said that a bad job is one with lots of responsibility but no authority. Effectively that is what parliamentarians are being given these days. We are given lots of responsibility in many ways but really no authority. This is one of the areas, the pension plans for public servants, where Canadians deserve better. Canadians deserve due diligence and parliamentary participation to ensure that in the long term these pension plans survive and are there for the future, and that the interest of all Canadians are represented in this public policy.

The bill effectively provides the mechanism for the government to withdraw the current $28 billion surplus from the federal pension plan over a period of 15 years, and any future surpluses can be withdrawn. The legislation will permit treasury board ministers without parliament in the future to determine the use of these surpluses and to set contribution rates.

The projected surpluses starting in the year 2000 will be about $2 billion to $3 billion per year which is a large sum of money. To have that money again going directly into the government's discretionary spending or being put toward whatever pet projects the government wants to pursue at a particular time, particularly before an election, is exposing the Liberal government to a significant temptation.

It is a temptation the Liberals welcome. It is one they are actually preparing for with this legislation. They will have access to more money to spend on purposes that are important to them, to spend on the next election and to spend getting ready by bribing Canadians with their own money. It will not be spent on the types of policies that are important for Canadians in the future and that will provide for a better quality of life and greater competitiveness in the 21st century. Instead it will be spent on the types of policies that will try to convince Canadians in the short term that the government has their best interest at heart.

This legislation is another example of government contempt and lack of appreciation for parliament. As I mentioned earlier, under this legislation there is no provision for parliament to hold the government accountable for withdrawals and for changes in the contribution rates.

This is highly analogous to the situation with the EI fund and what has happened since 1993. The government has taken $19 billion from the EI fund and at the same time has used that money to pad its books to make its own fiscal numbers look better than they actually are. It has maintained unnecessarily high EI premiums. At the same time it has reduced benefits in a draconian and cruel way in many sectors and in many regions of the country.

Currently in the EI fund, for instance, only 30% of those people who are paying into employment insurance actually qualify when they need to collect employment insurance. The government is maintaining this unfair practice simply because it wants access to that steady pool of capital, that influx of capital.

The government has an insatiable thirst for cold hard cash that it can spend on unrelated programs and policies. The government has a very circuitous approach to bookkeeping and a number of times has offended the auditor general with its less than straightforward bookkeeping. In fact one would need to be a forensic auditor to understand some of the provisions in the recent budget.

The fact that the government would use the EI fund to facilitate spending in other programs is clearly unethical and regressive. The amount of EI premiums paid by a Canadian making $39,000 will be the same as the amount of premiums being paid by a Canadian making $300,000. It is an inordinately unfair tax on lower and middle income Canadians.

The government is comfortable with its practice because it is a pool of capital. It can try to hide behind the guise of having an employment insurance program with an EI premium which in fact is an EI tax.

The reason I am discussing government treatment of the EI program is that it is completely analogous with its proposed treatment through Bill C-78 of the superannuation funds. As I mentioned, the government has an insatiable appetite for money. It has a questionable approach to financial and bookkeeping practices. In this case we are not arguing with the government's legal ability to do this. The Federal Superannuates National Association has actually sought legal advice and has agreed that the government has the legal ability to do this.

The question is one of what is right, what is correct, from an ethical perspective. Traditionally 40% of the contributions have been made by the employers and 60% by the employees. If the government is proposing to take a withdrawal from this fund there should be a requirement that a commensurate reinvestment be made in improved benefits. For instance, if the contribution rate were 60:40 and the government were to choose to withdraw $6 billion from the surplus, there should be a requirement that $4 billion be reinvested in better benefits for those people who have paid in, the members of these plans. That is clearly fair.

That the government would not even engage in a dialogue on splitting the surplus with its partner, the employees who have paid into the program over the course of their careers, is actually appalling.

There are some improved benefits. The dental benefit has been improved in the programs, and we commend that. We also see recognition of same sex survivor benefits. This is one case where the government has acted pre-emptively to avoid court action. Numerous court precedents have been set recently in the interpretation of Canada's Charter of Rights and Freedoms which demonstrate quite clearly that the government is not in a position to discriminate based on sexual orientation.

The government in this case is moving, I guess one could say, one step ahead of the sheriff. That is better than being one step behind the sheriff or being dragged kicking and screaming into the 21st century, as we have seen governments in Canada in recent months and years effectively waiting for the judiciary to force them to take these actions.

This action is consistent with the realities of Canada in 1999. Governments have to lead on these issues, have to take positions such as this one and have to recognize same sex benefits as opposed to being dragged kicking and screaming by the court system.

The issue of the proposed investment board is one that on the surface looks very positive. We are pleased to see that the pension funds will be invested in external financial markets to maximize returns on behalf of superannuates.

It is laughable sometimes, though, when the government proposes an arm's length operation of these boards from the government. I would suggest that with the government arm's length relationships have very short arms.

The Canada Pension Plan Investment Board, for instance, has 12 members, 6 of whom are major contributors to the Liberal Party of Canada. If one works it out statistically, only 0.2% of Canadians are contributors to the Liberal Party of Canada. Perhaps it is even fewer for my party, but I am not bitter. It is no coincidence that so many members of the Canada Pension Plan Investment Board are Liberal supporters and contributors.

I expect when we see this investment board announced we will see a similar consistency in terms of Liberal political interference in the appointment process to these boards that will be making investment decisions for the future retirement funds of Canadians.

If there is political interference in the decisions applying to the appointment of the boards in these cases, Canadians should be concerned about political interference in the decisions and the investments made by these boards. That is a very significant concern to Canadians. I hope we consider it very carefully in the House because it is a significant risk.

Although the government purports to be trying to maximize the returns for superannuates through these changes, the fund will still be limited by the foreign content rule so that only 20% of the fund can be invested in foreign markets. The fact is that the Canadian equities markets have grossly underperformed competitive equities markets in other countries.

Since 1993 the Dow Jones industrial average has grown in value by 180%. The S&P 500 has grown by 172%. During the same period of time the Toronto Stock Exchange has grown in value by 60%.

Wealth is relative and if we deny Canadians an opportunity to achieve geographic diversification by investing as many global mutual funds do around the world to maximize the returns and to spread out their risks, we are denying Canadians the ability to build maximum wealth and retirement income in the next century.

Another issue is one we have with government policy on RRSPs. We are increasingly saying to Canadians that they must plan ahead, that they must invest for their own retirements and that they must take responsibility. At the same time we are not giving Canadians the means and freedom by which to make the best possible decisions.

The superannuation fund will again be denied the opportunity to have a maximum level of growth and a reduction in the level of risk through geographic diversification.

It is estimated that the foreign content rule costs .2% of Canadian pension funds and mutual funds based in RRSP assets. In the long term that means a 3% to 4% reduction in pension benefits for Canadians.

Some people have argued against eliminating or reducing the foreign content rule saying it would take money out of the Canadian equities market, the capital that we need in Canada. I would argue that with the Canada pension plan reform, the Canada pension plan investment fund and the superannuation investment fund, which will be invested privately, it is a perfect opportunity to invest capital from these huge, copious quantities of quid coming out of these programs into the domestic equities market.

This is the perfect time for the government to take this step. It will help provide an ameliorative step to prevent any negative impact on the Canadian equities market. There will be more capital available for both the Canadian equities market and the foreign equities market. It can be phased in over a period of time.

If we are serious about improving the quality of life and standard of living for Canadians, the government should not be forcing Canadians to invest the bulk of their retirement savings into Canadian markets, which represents 1.5% of the global equities markets. It clearly defies the logic of good portfolio management. I have some concerns about that.

The legislation at hand will make available through a surplus about $2.5 billion per year starting April 1, 2000. It will provide significantly more freedom in the future to a government to use this money for whatever purposes it wants. These pension funds were developed to provide for the long term security in retirement for the superannuates. They were not designed to provide slush funds for governing parties.

The government will say that this is a defined benefit and, since it is responsible for the payments of the pensions regardless, it has a right to do whatever it wants. We are not arguing with its legal ability to do this. We are arguing with the ethics of doing it. When the members pay a contribution rate of 40%, there should at least be an acknowledgement that there should be a significant improvement in the benefits paid out prior to a significant reduction or withdrawal of the surplus.

The other thing I noted was that the CPP actuary will be making the recommendations relative to the setting of the premiums. I remember a chap by the name of Bernard Dussault who was a CPP actuary. If I remember correctly, the government fired him. The smoking gun that the government had, indicated that he was fired because of his inability or lack of desire to hide the truth about the future of the Canada pension plan.

The last thing we need is a system that creates more potential for abuse of power, more Bernard Dussault situations where good civil servants are fired for telling the truth, and situations where there are reductions in the power of parliamentarians in designing the type of public policy Canadians need and a commensurate increase in the power of the government to do whatever it wants with money because of its insatiable appetite for spending in any area.

We look forward to debating this issue over the next few weeks. I would hope that members of parliament take very seriously the potential wrath of seniors in the next federal election. I believe seniors are the people who deserve to be listened to, and in the next federal election they will make their case very clear.

Mr. Speaker, part way through the member's speech, I think he said that we, on the governing side, had a questionable approach to finances and bookkeeping.

I find it odd that the member would talk about questionable bookkeeping. This country was faced with a massive deficit of $42 billion in 1993 because of the mess left by this member's party. For him to talk along those lines is outrageous at best and ridiculous at most.

I also listened with intent while he was talking about EI. I noted that it was in 1986 when the then auditor general indicated that in fact that money was to be part of the consolidated revenue. That, again, was during the tenure of the member's party. I am not sure what point the member was trying to make, but he knows full well that the rules we operate under are the rules that have been set out by the auditor general.

When it comes to appointments to boards and commissions, there was no one in the history of this country who was better than his party leader, Mr. Mulroney, when it came to appointments and patronage. I can tell members that Canadians still look fondly upon Mr. Mulroney as the king of patronage, bar none, when it comes to those kinds of issues.

This is an excellent piece of legislation despite what the hon. member says about trying to stir up and upset seniors over whether or not their pensions are guaranteed. The member knows full well that they are. It is important for us to indicate to our pensioners and senior population that they are not going to get any more, but they are also not going to get any less. We have that guarantee for them in place.

I was interested in the member's comments on the foreign content rule. Could he perhaps elaborate a little further on why he thinks there should not be at least some portion of investment here in Canada? Does he think it should be wide open and go far beyond other jurisdictions? I thought I heard him say that. What does he have against investments in Canada? I would be interested in his comments.

Mr. Speaker, I will start with the last question first, relative to the foreign content issue. I guess the member did not hear what I was saying. Canada's equities markets have grossly underperformed those of other countries, but Canadians are not to blame for that.

I think Canadians, with the right type of leadership, could excel and create economic growth, jobs and so on but they need lower taxes. That is one of the reasons why in Canada our TSE, the Toronto Stock Exchange, has grown in value by only 60% since 1993 when this government got elected. During the same period of time, the Dow Jones industrial average has grown by 180% in the U.S. The Standard & Poor's 500 has grown by 172%.

During the same period of time, Americans growth and wealth, for those who participated in the market because of their mutual funds and pension funds, have become three times wealthier in terms of growth in economic wealth compared to Canadians. Wealth is a relative thing.

The hon. member opposite may be satisfied that Canadians are getting poorer while Americans are getting richer, but I and members of my party are not.

In terms of his comments relating to dubious bookkeeping, my comments reflected those of the auditor general a number of times over the past few budgets of the government.

The fact is that in 1984 the Conservative government of Brian Mulroney inherited a $38 billion deficit, in 1984 dollars, from the previous government. At that time, that represented 9% of GDP. By the time the government left office in 1993, that had been reduced to around 5% of GDP, almost halved as a per cent of GDP. During that time that government implemented free trade, the GST and deregulated financial services, transportation and energy.

I wonder what impact those policies had on this government's ability to eliminate the deficit. It was summed up very well in an article in The Economist last January. It said that the credit for deficit reduction in Canada belongs largely to the passage of time and economic structural reforms made by the previous government, including free trade, the GST, deregulation of financial services, transportation and energy, all those policies which were vociferously opposed by this member's party.

I heard one of the members from the other side of the House earlier today accusing the opposition of fearmongering. I see the hon. member has left the House he is so ashamed of his mistakes and his intervention.

During the free trade debate, I remember Roy MacLaren, the current high commissioner in London and past Liberal member of this House, actually saying that the Liberals would blame the Conservative government for every sparrow that falls. Well, it is because of those initiatives that a lot of sparrows have soared in Canada. It is this government's high tax policies since 1993 that have basically caused a lot of fallen sparrows and a lot of falling incomes, personal disposable incomes and standards of living for Canadians.

I would add that the member for Waterloo—Wellington has come back and has regained his composure.

Before we go to questions and comments, it is appropriate to admonish members that we do not refer to the absence or to the presence of members. Specifically, we do not impute motive for a members leaving the Chamber at any particular time.

Mr. Speaker, as the member knows, the debate today has to do with pension funds for civil servants. The debate is all about who owns the money. There are people who say that it belongs to the taxpayers since all of the money comes from the taxpayers.

As members of parliament, we could quite rightly concede that all of our income and pension, those members who have a pension, comes from the taxpayers since that is where the money originates. One could argue that we earned it, in which case it belongs to us, but it did originate with the taxpayers.

One of the debates raging in the country between the unions, the taxpayers and the government is about who gets the money. Whose $30 million is it? Even for you, Mr. Speaker, that would be more than just your average weekend spending money. That is a lot of money.

Exactly where does the member stand on who gets the money? Is it fair for the government to claim that on behalf of taxpayers it is taking it? Does it all belong to the unions? Is there a split somewhere? What is his view on this?

Mr. Speaker, we have to look at the contribution rates and the fact that 40% of the contributions to this plan are made by the members.

I believe quite strongly, particularly with the investment policies promoted by and provided for in the new legislation, that the returns for this fund should actually improve over a period of time. If the government were to withdraw 60% of the fund, 40% should go back into improved benefits.

I recognize the government's arguments relative to defined benefits, that there is a guarantee the government has, but the government is grossly overestimating and exaggerating that argument to deny reasonable benefits. There was a small improvement in benefits in this legislation. But the fact is that the improvements sought by the Federal Superannuates National Association go a lot further in terms of survivor benefits for instance and in a number of areas create a much more comprehensively fair package of benefits for its members.

I would suggest, before the government delves into this plan for general spending purposes, that it should look more seriously at improving benefits within the plan.

The other thing we should keep in mind as well, in response finally to the hon. member's question, is that over the period of time, particularly with investments in the equities markets, it is not a bad thing to have a reasonable surplus within the plan from a security perspective. We should always be cautious about withdrawing that surplus and then in the future asking the taxpayer to kick back in.

The correct answer frankly is some combination of what he has suggested. I do believe we need to call in some of the best pension experts and benefits experts in the country if not in the world to help design the most optimal combination. It is not one that we should define in parliament solely on a debate type format without reasonable diligence and research.